Category: Canada

The Office of the U.S. Trade Representative (USTR) announced yesterday that it is requesting public comments to assist the USTR in identifying significant barriers to U.S. exports of goods and services, including foreign IP protection deficiencies. The comments are being collected for inclusion in the USTR’s annual National Trade Estimate Report on Foreign Trade Barriers (NTE Report) that identifies barriers to U.S. exports including the “lack of intellectual property protection (e.g., inadequate patent, copyright, and trademark regimes).”

Check out my post today on The IPKat about a number of similar recent U.S. trademark cases brought by well-known U.S. and Canadian brands against foreign (predominately Chinese) counterfeiters in order to stem the flow of inbound online counterfeit sales into the U.S.

On Tuesday, the U.S. House of Representative’s Subcommittee on Courts, Intellectual Property and the Internet held a hearing on a number of proposed reforms to U.S. copyright laws that have a number of potential implications for internationally focused businesses. Reforms that were discussed at the Tuesday hearing included termination rights, resale royalties, moral rights and copyright terms. Among those who testified included representatives from the U.S. Copyright Office, the Songwriters Guild of America, Inc. (“SGA”), the Future of Music Coalition (“FMC”), the American Enterprise Institute (“AEI”),and the Creative Commons USA (“CC”).

Although a substantial amount of testimony given at the hearing was related to particular U.S. industries needs (e.g. music and visual arts), potential U.S. termination rights, resale royalties, moral rights, and copyright term reforms has implications on nearly all businesses both in the U.S. and abroad.

To better understand the potential implication of these reforms, it is best to evaluate them individually.

Termination Rights

One of the reforms discussed at the Tuesday hearing that arguably has the greatest likelihood of being implemented, as well as trade-related importance, is termination rights. Under 17 U.S.C. § 203 of the U.S. Copyright Act, a creator of a copyright-protected work (“author”) may cancel the transfer or license of rights to the work 35 years after its transfer or license to another party. However, the elimination of such rights has been recently proposed in U.S. free trade agreement (FTA) negotiations. In the Trans-Pacific Partnership Agreement (TPP) negotiations, the U.S. has proposed IP Chapter terms that would arguably eliminate termination rights in TPP member states (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam). This means an author from a TPP member state would be unable to terminate the transfer of rights or license of their work in the U.S. or other TPP member state(s) as currently provided under U.S. law.

Representatives from the FMC and CC testified on this issue, both calling for upholding existing termination rights under U.S. law. The FMC went even further and explicitly called on Congress to ensure that such termination rights continue to be made available in international agreements the U.S. enters such as the TPP.

Whether the U.S. decides to uphold or eliminate termination rights will have global implications for international businesses. If the U.S. decides to uphold termination rights in the U.S. Copyright Act and FTAs, it would provide content-producing businesses greater rights and flexibility in protections in their works, both in the U.S. and abroad. In contrast, eliminating termination rights would provide businesses who purchase rights to protected works greater assurance that their ownership or rights to such works will be protected.

Regardless of the benefits or drawbacks of eliminating termination rights, it remains unclear from the Tuesday hearing how Congress will decide to proceed.

Resale Royalties

Tuesday’s hearing also included testimony on whether the U.S. should adopt resale royalty requirements. Some of the U.S.’ major trading partners, such as Australia, the EU, and Russia among others, require that authors (in most cases, visual artists) be entitled to royalties for the resale of their works. However, the U.S. has yet to adopt such measures despite their voluntary recognition in Article 14ter of the Berne Convention for the Protection of Literary and Artistic Works (“Berne Convention”), and several U.S. federal and state legislative attempts to do so. The main argument against such royalties is that oppose the first sale doctrine, which generally allows for the unrestricted domestic secondary sale of copyright protected works.

During Tuesday’s testimony, the sole testifying entity, the U.S. Copyright Office, stopped short of calling for the U.S. adoption of resale royalty laws. The Copyright Office recognized the disadvantages visual artists have compared to other authors in recouping the true value of their works, and that over 30 countries have now adopted resale royalty requirements. However, their testimony stated that mandated resale royalties were not the only means to remedy such disadvantages as voluntary initiatives and best practices could also be utilized, and that the true benefits of a resale royalty regime is difficult to quantify.

Based on such timid testimony, it appears unlikely that the U.S. will seriously consider adopting mandated resale royalties as currently provided in EU and other countries in the near future. The lack of a current and potentially future mandated U.S. resale royalty regime emphasizes that visual artists and other authors will need to find alternative means in order to obtain effective compensation for their works.

Moral Rights

The Tuesday hearing also evaluated to what degree the U.S. should adopt stronger moral rights protections. Moral rights, as detailed under Article 6bis of the Berne Convention, gives an author non-economic rights in a work even after the transfer or sale of their work including the right of attribution that allows them to object to the distortion, mutilation or modification of their work. Currently, the U.S. only extends such rights to visual artists under 17 U.S.C. § 106(A) and in an arguably less encompassing manner. In contrast, many major U.S. export markets such as Australia, Canada, China, and EU have more robust moral rights protections.

None of those who testified on moral rights argued for an explicit extension in the U.S. despite acknowledgements of its benefits. The SGA and FMC stressed that freedom of speech and fair use considerations should be balanced with any moral rights considerations, and the CC highlighted the difficulties and costs of establishing exclusive attribution rights. Based on these testimonies, it appears unlikely that the U.S. will adopt moral right reforms in the near future.

Copyright Term

Lastly, but arguably the most contentious issue of this hearing was copyright term reforms, namely the period of time in which a qualifying work is entitled to copyright protection. Under 17 U.S.C. § 302, a copyright protected work is entitled to protection for the life of the author and 70 years after their death for a natural person author, and 95 years for works created by legal entities. Such copyright terms are well beyond international norms as Article 7 of the Berne Convention establishes copyright protection for the life of the author and 50 years after their death for a natural person, and 50 years for legal entities. The U.S.’ extended copyright term is controversial as it is argued to harm the public through unnecessary taxation and limits on creative freedom, especially as the U.S. has proposed that other countries adopt similar terms in FTAs such as the TPP and the U.S.-Australia FTA, just to name a few. Despite these criticisms, such extended terms give U.S. and other FTA member state authors and copyright owners longer copyright protections in their works.

The testimony provided in the Tuesday hearing varied widely as to whether the U.S. should amend its copyright terms, both in the U.S. Copyright Act and FTAs. The CC called for a reduction in copyright terms, while the FMC and AEI took a less argumentative stance by disagreeing with any term extensions. Contrastingly, the SGA rejected any term reductions. The CC was only group to identify copyright term issues in FTAs by highlighting widespread criticism towards the U.S.’ attempt to propose U.S. copyright terms in the TPP and the CC’s efforts against the same. However, the lack of a comprehensive rejection of the U.S.’ current copyright terms or more robust efforts to prevent their inclusion in U.S. FTAs means that any reforms to the U.S. copyright terms are unlikely.

What’s The Takeaway? The Tuesday hearing highlighted that the U.S. is at least evaluating copyright reforms that may harmonize U.S. copyright laws with other countries. Although it appears unlikely that the U.S. will adopt moral rights, copyright term or resale royalty reforms, the potential invalidation of termination rights does seem to be a potential possibility in the near future, especially in light of the U.S.’ TTP IP Chapter Proposal. Businesses and authors with substantial copyright portfolios should be aware of these reform efforts and adjust their copyright protection policies as needed in order to best protect rights in their works, both in the U.S and abroad.

Check out my post today on The IPKat about The Church of Jesus Christ of Latter-day Saints’ Canadian trademark litigation against a British Columbia-based Mormon fundamentalist group that will likely be determined by concurrent use considerations.

Canadian government officials announced last week that Canada will formally adopt its notice and notice online copyright enforcement system (“Notice and Notice System”) starting in January 2015. Passed in recent updates to Canada’s copyright laws, The Copyright Modernization Act (Bill C-11), the Notice and Notice System will require that Internet intermediaries, such as Internet service providers (ISPs) and website hosts, either notify their customers of allegedly infringing conduct or remove infringing content they host upon receiving a notice of alleged infringement from a copyright owner or the owner’s authorized agent.

Although the Notice and Notice System claims to strike a balance between the rights of copyright owners and Internet users, it has been criticized by industry groups and practitioners (including myself) as being an ineffective system to allow copyright owners to directly enforce rights in their works online short of a judicial action, especially in comparison to its U.S. counterpart under the Digital Millennium Copyright Act (“Notice and Takedown System”). Despite these criticisms, it does not appear that Canada will adopt stronger online enforcement measures in the foreseeable future, meaning copyright owners and their agents need to understand the Notice and Notice System’s procedures, and potential alternative enforcement measures, in order to effectively protect their works online in Canada.

So what do copyright owners and their agents need to know about the Notice and Notice System?

Notice Procedures. In order to utilize the Notice and Notice System, a copyright owner or their agent must submit a notice to the Internet intermediary hosting the infringing work in order for the Internet intermediary to take action. According to Bill C-11, a notice must:

State the claimant’s (copyright owner or agent’s) name, address and other relevant communication information;

Identify the work or other subject-matter to which the claimed infringement relates;

State the claimant’s interest or right with respect to the copyright in the work or other subject-matter;

Specify the location to which the claimed infringement occurs;

Specify the infringement that is claimed;

Specify the date and time of the claimed infringement; and

Provide any other relevant information or information required by other Canadian regulations.

Drawbacks. As mentioned, the Notice and Notice System is a weaker online copyright enforcement regime compared to systems in other countries such as the U.S.’ Notice and Takedown System, and regimes in Australia and Japan (among others). Particularly, the Notice and Notice System does not mandate that an Internet intermediary remove infringing content upon notice of an alleged copyright infringement in order for the intermediary evade contributory liability. Further, the penalty an Internet intermediary may face for failure to comply with a notice’s requested takedown is substantially less compared to penalties under U.S. copyright law. Further information on these deficiencies can be found here.

Implementation. Although the Notice and Notice System will not formally come into force until January 2015, many Canadian Internet intermediaries already adhere to its system on a voluntary basis. This means that copyright owners and their agents should at least consider utilizing the Notice and Notice System now as many Internet intermediaries have already adopted its procedures.

Alternative Online Enforcement Measures. Despite the Notice and Notice System’s relative weakness compared to its U.S. and other foreign counterparts, many Canadian Internet intermediaries may be brought under U.S. jurisdiction, and thereby be subject to more forceful enforcement measures under the Notice and Takedown System. This requires that an infringed online work qualify for protection in the U.S. and that the Internet intermediary in question be subject to U.S. jurisdiction based on their activities and interactions with the U.S. market. Further information on qualifications for the U.S. Notice and Takedown System can be found here.

What’s The Takeaway? Canada’s Notice and Notice System is a weaker system for copyright owners to directly enforce their rights in their copyright-protected works online. However, knowing its enforcement procedures as well as viable alternative enforcement measures can help to ensure that copyright owners can more effectively protect their works online in Canada and potentially beyond. That being said, a copyright owner should consider working with a qualified IP attorney in order to ensure that they effectively utilize the Notice and Notice System as well as other countries’ online copyright enforcement systems.

A little over a month ago, the Canadian Government introduced a bill (Bill C-31, the Economic Action Plan 2014, No. 1) that proposes substantial reforms to Canada’s trademark system. Initially proposed for Canada to uphold its international IP treaty commitments, the proposed trademark reforms in Bill C-31 will potentially impact not only how foreign businesses obtain trademark protection in Canada, it will also influence how such businesses evaluate their global brand protection and marketing strategies.

Although Bill C-31 offers many important trademark reforms that several commentators have provided good insight on (a couple of good analyses are available here and here), the two proposed reforms that will arguably impact foreign businesses the most are: (1) the removal of date of use requirements for trademark registration; and (2) the adoption of the Nice Classification of Goods and Services.

No Date of Use Requirements For Trademark Registration: Bill C-31 will remove current requirements that a Canadian trademark application enclose a date of use in Canada or another country. Currently, Section 30(b)-(d) of the Trade-marks Act requires that trademark applicants provide the date that their trademark has been used in Canada, is intended to be used in Canada, or details of any registration abroad. However, Bill C-31 removes these requirements and only requires that an applicant “use or propose to use, and are entitled to use” a particular trademark in Canada, effectively removing any requirement of providing a specific date of use of a mark in Canada or abroad in a Canadian trademark application.

The removal of such date requirements has benefits and drawbacks for foreign businesses. It would potentially give foreign businesses time advantages and cost benefits in protecting and marketing their brands in Canada and beyond. Without mandating a showing of use or potential use in Canada, foreign businesses will likely be given time after their trademark is registered to determine whether that mark obtains legal protections in other countries without actually having to use the mark in Canada. This helps such businesses to better evaluate the risks of using a particular brand globally without having to exert funds to show actual use of the brand in the Canadian market. From a marketing perspective, removing dates of use requirements would also give foreign businesses time to determine whether their brands develop positive consumer recognition in other markets prior to use in Canada that can help such businesses to better strategize how to market their goods and services on a global scale.

The downside to the removal of date of use requirements is that it may increase trademark trolling. As other commentators have reported, removing date of use or potential use requirements may allow persons or entities to register unused trademarks in order to extort money from legitimate businesses who have not yet registered such marks with the Canadian Intellectual Property Office (CIPO). If Bill C-31 is implemented in its current form, such a scenario has substantial cross-border business implications as a party could register a mark with CIPO for an emerging foreign business not yet operating in Canada and then extort such business for rights to the mark as they expand into Canada. This often happens in trademark jurisdictions where no dates of use registration requirements exist. For example, China does not maintain date of use trademark registration requirements and famous foreign brands such as Apple, Tesla Motors and even hall of fame basketball player Michael Jordan have had their trademarks prior registered by Chinese trademark trolls.

Although it is uncertain whether Canada’s proposed removal of date use requirements under Bill C-31 will result in the same level of trademark trolling as seen in China, there is such a possibility if such reforms are enacted.

Adoption of the Nice Classification: Bill C-31 will also impact foreign businesses through Canada’s adoption of the Nice Classification of Goods and Services (Nice Classification) for trademark registrations. Under Bill C-31’s proposed reforms, a Canadian trademark application will be grouped according to classifications provided under the internationally recognized Nice Classification, instead of Canada’s own existing wares and services classifications. Being one of the last holdouts to adopting the Nice Classification, Canada’s wares and services trademark classification system has made it challenging for foreign businesses to ensure that their Canadian trademark registrations are harmonized from a classification standpoint with registrations of the same mark in other countries that have adopted the Nice Classification. Further, Canada’s reluctance to adopt the Nice Classification has effectively prohibited Canada from adopting the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol), which allows a trademark application or registration from a Madrid Protocol country to be submitted for registration in other Madrid Protocol countries.

If Canada adopts the Nice Classification, foreign businesses can better ensure that their trademark registrations in Canada cover similar goods and services as provided in registrations of the same mark in other countries. Further, as Canada’s adoption of the Nice Classification would better allow Canada to implement the Madrid Protocol in the near future, such reforms would give foreign businesses the potential to reduce costs and logistical burdens in registering their marks in Canada and other Madrid Protocol countries. However, it is important to emphasize that Bill C-31 does not effectively implement the Madrid Protocol.

What’s The Takeaway? Bill C-31 proposes several substantial reforms that may benefit foreign businesses, while also posing some potential risks. Although Bill C-31’s proposed reforms are promising, Bill C-31’s reforms have yet to be enacted and it is uncertain whether its proposed reforms will be enacted in the same form described in this positing.

Regardless of whether Bill C-31’s trademark reforms are perceived to be beneficial or problematic, no one can deny that its proposed reforms will dramatically impact Canada’s trademark system for foreign businesses.

Last month, the European Parliament passed legislation and the European Court of Justice (CJEU) handed down a ruling that expands trade-related intellectual property (IP) protections in the European Union (EU) and beyond. Particularly, the European Parliament passed laws granting EU customs officials the ability to detain trademark counterfeit transshipments transiting the EU, while the CJEU ruled that EU customs authorities can seize counterfeit goods in the EU that were purchased for personal use from sellers outside the EU. Although these are positive developments that provide IP rights holders the ability to stem the flow of infringing goods, and ultimately better enforce their IP rights across borders, they also have important requirements and limitations that need to be understood.

The new Directive (T7-0118/2014) is an attempt to reverse (in part) the 2011 joint CJEU ruling by granting EU trademark owners expanded rights to legal action. According to the legislative text, a EU trademark owner will have the right to prevent others from bringing non-circulated goods into the EU that bear the owner’s trademark without authorization. This includes the “right to request national customs authorities to take action in respect of goods which allegedly infringe the [IP rights holder’s] rights.”

Beyond giving IP rights holders valuable protection against the flow of counterfeit goods into the EU, the Directive also has IP protection implications beyond Europe. According to the latest statistics available from the World Shipping Council, eight of the 50 largest container ports in the world are located in the EU. The Directive thereby gives IP rights holders the ability to stop counterfeit goods leaving a substantial number of the world’s major transshipment points, thereby limiting the global dissemination of goods infringing their marks.

Although the reforms are a welcomed enhancement of cross-border protections for IP rights holders, there are a few considerations and limitations IP rights holders should be aware of:

Trademarks Only. The Directive only applies to trademarks. Although an IP rights holder can register their EU trademarks, copyright, patents and geographical indications for monitoring by EU customs officials, the Directive’s transshipment protections only apply to trademark counterfeit goods. Similar measures may be soon adopted to prevent transshipments of counterfeit copyright goods through the EU as the European Commission is currently evaluating copyright reforms. Yet, the Directive’s exclusion of copyright counterfeit goods is particularly problematic as copyright counterfeit goods constitute a substantial amount of counterfeit goods being transshipped through the EU and other major markets.

Community Trademark Registration Required. To qualify for transshipment counterfeit protections under the Directive, a trademark owner would likely need to register their mark on a community-wide (EU) level with the Office of Harmonization for the Internal Market (OHIM). Each EU member state maintains their own trademark offices, granting a registered mark exclusive protection in their state respectively. Yet, a trademark owner would likely need a community trademark registration to qualify for the Directive’s transshipment protections as the Directive’s text only identifies “European Union trademarks” as qualifying for such protections. Fortunately, qualifying foreign IP rights holders may be able to more easily (and cheaply) obtain community registration(s) through registering their trademark(s) through the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol). However, requiring a community trademark registration to qualify for the Directive’s new protections puts EU member state trademark owners at a disadvantage compared to community trademark owners.

Customs Recordation Required. A trademark owner or rights holder would need to record their community trademark registration with EU customs authorities to qualify for the Directive’s new transshipment protections. Although customs recordation is not a specific requirement under the Directive to qualify for the enhanced transshipment protections, it is required to ensure EU customs officials are made aware of a community mark owner’s or right holder’s registration.

Directive Has Yet to be Enacted. Lastly, it is important to note that the Directive has yet to be enacted in EU member states and it remains to be seen how it will be implemented. EU member states have 30 months to implement the new Directive into their national laws, and although they are obligated to adopt the laws effectively and in the spirit of the Directive, the member states’ implementing legislation may have specific divergences.

Counterfeits for Personal Use. On February 6, 2014, CJEU ruled in Blomqvist v. Rolex SA (C‑98/13) that EU customs officials could seize and destroy non-EU originating counterfeit goods in the EU that were purchased by EU citizens for personal use. In Blomqvist, a Danish citizen bought a fake Rolex watch from a Chinese online seller. When the watch entered Denmark, Danish customs reported the suspected counterfeit to Rolex’s IP rights holder, who in turn demanded the destruction of the counterfeit watch. Danish courts found that because the counterfeit watch was purchased from a non-EU seller who was not directly selling or advertising to EU consumers, and because the watch was purchased for personal use, such a purchase did not constitute trademark or copyright infringement by the purchaser under Danish law.

The CJEU in Blomqvist reversed and found that Rolex’s copyright and trademarks were infringed, and that a EU IP rights holder does not have to prove that a non-EU seller was directly trying to sell or advertise counterfeit goods for personal use in the EU in order for EU customs officials to seize imports of the counterfeit goods. Under the EU’s previous customs regulations (Council Regulation 1383/2003), a EU trademark or copyright owner would have to prove that the counterfeit seller was directly trying to market their counterfeit goods to EU consumers in order for the personal purchase to be subject to infringement and seizure. As reported by commentators, the Blomqvist Court differed from the Council Regulation by establishing that an IP rights holder is entitled to protection of their EU trademark or copyright whenever an infringement of the same occurs in EU territory, and that counterfeit goods can be seized whenever such infringing goods enter EU territory.

Although the Blomqvist ruling gives IP rights holders stronger protections against foreign counterfeit sellers, like the Directive, there are considerations and limitations IP rights holders should be aware of:

EU IP Protection and Customs Recordation Required. Like the Directive, a trademark or copyright owner would need to ensure that their IP qualifies for protection in the EU and that they have recorded such IP with EU customs authorities in order to qualify for protections under Blomqvist.

Additional Investigation Suggested. Qualifying IP rights owners will likely need to investigate and track suspected non-EU counterfeit sellers to determine when and to whom they are selling personal counterfeit goods to ensure effective protection under Blomqvist. Rolex was fortunate in Blomqvist that a single counterfeit of their watch was detected by EU customs authorities. Unfortunately, not all brands are as well known as Rolex. A similar counterfeit personal purchase shipment for a lesser known brand may not have been as easily identified by EU customs authorities. These circumstances mean that an IP rights holder may need to perform their own monitoring to effectively detect personal shipments of counterfeit goods entering the EU. Unfortunately, this can be an expensive service that many IP rights owners do not have the resources to obtain.

What’s The Takeaway? These recent EU counterfeit enforcement reforms show that the EU is serious about preventing the cross-border flow of counterfeit goods. IP rights owners who have had problems with IP enforcement in the EU or through transshipments originating in the EU, now (or will soon) have enhanced means to protect their IP against counterfeits. Despite these advancements, IP rights holders should work closely with their counsel to ensure they understand and comply with the requirements and limitations of these recent reforms.

On February 8th, the IIPA submitted their 2014 Special 301 Report Submission to the USTR. As one of the largest U.S. lobbying groups for the copyright-based industries, the IIPA’s submission identifies the foreign countries the IIPA believes provides the most ineffective IP legal protections for U.S. businesses. The USTR’s final Special 301 Report (released annually April-May) provides reporting to the U.S. government and the general public on the countries that, according to the Omnibus Trade and Competitiveness Act (19 U.S.C. § 2242(a)), deny “adequate and effective protection of [IP] rights” or “fair and equitable market access to United States persons that rely upon [IP] protection.”

Although the U.S. government rarely imposes trade sanctions based on the Special 301 Report, a country’s listing in the final report often impacts the U.S.’ trade relations with that country and the degree to which the U.S. government initiates trade promotional activities with the same. From both a private sector and practical standpoint, the Report also represents a review of the markets that U.S. businesses have had the most IP protection challenges.

What countries did the IIPA recommend for inclusion in the 2014 Special 301 Report?

Priority Foreign Countries. For a second year in a row, the IIPA has identified Ukraine as being a “Priority Foreign Country.” This is the least favorable designation available under the Special 301 reporting system. Specifically, it identifies that country as one with the “most onerous or egregious acts, policies, or practices” that “have the greatest adverse impact (actual or potential) on the relevant [U.S.] products” without making efforts to ameliorate their status. 19 U.S.C. § 2242(b)(1)). Ukraine’s designation as a Priority Foreign Country was based on a number of factors, most notably the absence of effective online copyright enforcement, and unfair and non-transparent royalty society collections. Shockingly, the classification was also based on reports of widespread software pirating by Ukrainian government agencies.

Newly Non-Listed Countries. It is also important to note that the IIPA has recommended removing a number of countries from the final 2014 Special 301 Report due to their improvements in IP protection. These countries include Barbados, Bolivia, Colombia, Dominican Republic, Egypt, Finland, Guatemala, Jamaica, Lebanon, Pakistan, Paraguay, Peru, Trinidad and Tobago, and Venezuela.

What’s The Takeaway? Every foreign market has its own IP protection challenges. U.S. businesses that are exploring expansion into new markets should consider the IIPA’s Special 301 Report Submission (as well as the USTR’s Final Special 301 Report due out later this year), and the USTR’s Out-of-Cycle Review of Notorious Markets to help evaluate the IP risks associated with such markets. Doing so can help to ensure that such businesses can better protect their IP assets as they expand.